Unlocking Impact: The Great Shift for Trusts and Foundations
by Sandy Carvajal, Impact Manager at Brightlight
As impact investment specialists, we at Brightlight are passionate about helping trusts and foundations align their investments with their mission. Recently, I had an enlightening conversation with Elizabeth Gillies, CEO of Menzies Foundation, about their journey towards responsible and impact investing. This discussion highlighted the transformative potential—and very real challenges—of what we're calling "The Great Shift".
The Power of Aligned Investments
When we talk about impact for trusts and foundations, there's often a laser focus on grant-making. However, we've found that this view overlooks a crucial opportunity. The majority of a foundation's capital sits in their investment corpus, which presents enormous potential to amplify impact through investment.
At Brightlight, we see more and more Australian trusts and foundations making this realisation. They're starting to ask: How can we ensure our investments aren't undermining our mission? How might we use our entire portfolio to drive positive change?
This shift isn't just about doing no harm. It's about actively contributing to solutions for both social and environmental challenges through thoughtful investment strategies. It's an exciting frontier that can significantly expand a foundation's impact footprint.
Navigating the Journey: Lessons from Menzies Foundation
The path to aligning investments with impact isn't always straightforward. Through our work with Menzies Foundation, we've identified several key steps and challenges that are common in this journey:
Start with Impact
One insight that really resonated from our discussion was the importance of starting with impact, not investment. Before diving into portfolio adjustments, it's crucial to have a clear understanding of the impact you want to achieve as a foundation. This means looking beyond individual grants to consider your overall impact framework and how different tools—grants, investments, partnerships—can work together to drive change.
Build Knowledge and Expertise
We often find there's a knowledge gap when foundations begin this journey. It's completely normal to feel overwhelmed at first! As Liz shared, she spent time Googling financial terms, attending workshops and summits to build her understanding. This process of learning—for staff, board members, and investment committees—is a vital part of the journey.
In our experience, it's helpful to take a staged approach. Start with conversations about what is currently in your portfolio, whether ESG (Environmental, Social, and Governance) factors are included, then gradually build more nuanced understanding of existing impact opportunities and different investment approaches, and how these align with your mission.
Bridge Silos
One of the biggest challenges we see is the siloed nature of conversations around grant-making, governance, and investments. Breaking down these silos is crucial for developing a cohesive impact strategy.
At Brightlight, we often play a facilitating role in this process, bringing together different perspectives and expertise. For Menzies Foundation, this collaborative approach—involving their financial advisors, investment committee, and our team—was key to defining the recommendations that most aligned with their impact and investment goals.
Grapple with Real Challenges
The shift towards impact investing isn't just about high-level strategy—it involves wrestling with practical realities. How do you balance impact goals with financial return requirements? How do you manage liquidity needs for operations and grant-making?
We worked closely with Menzies to address these challenges, reviewing portfolios against the Impact Management Projects ABC framework, and modelling portfolios to show how shifts in responsible and impact investments could be integrated while meeting financial objectives.
Embrace Discomfort and Vulnerability
One of the most powerful insights from our conversation was the importance of embracing discomfort. As Liz put it, feeling uncomfortable often means you're on the right track. You're pushing boundaries, asking new questions, and reimagining what's possible.
This journey requires vulnerability—a willingness to admit what you don't know and to explore new territories. It's not always easy, but it's how real change happens.
The Bigger Picture: Shaping the Future of Finance
What's truly exciting about this work is its potential to push and reshape the boundaries of traditional finance. We're seeing more ecosystem builders entering the impact investing space and demanding the acceleration of impact opportunities.
Trusts and foundations have a unique role to play in this evolving ecosystem. They can be catalytic, patient, and innovative in ways that other investors often can't. By exploring new funding mechanisms or taking equity positions in mission-aligned ventures, foundations can help build entirely new markets for impact.
Moving Forward: Your Next Steps
If you're feeling inspired to start or continue your own impact investing journey, here are some practical next steps:
Reflect on your foundation's impact goals. How might your investments support these objectives?
Assess your current portfolio. We can help with tools to diagnose where your investments sit across the impact spectrum.
Start conversations with your board and investment committee about aligning investments with mission.
Seek out peers who are on similar journeys. The willingness to share experiences in this space is truly heartening.
Consider bringing in specialist support. Whether it's Brightlight or another accredited provider, external expertise can be invaluable in navigating this shift.
Remember, this is a journey. It takes time, persistence, and a willingness to learn. But the potential impact—leveraging your entire corpus for good—makes it incredibly worthwhile.
At Brightlight, we're here to support you every step of the way. Together, we can unlock the full potential of your foundation's assets to create meaningful, lasting change.
Contact Ivan Chew, at ichew@brightlightimpact.com to learn how Brightlight can support your foundation's impact journey.